New Year Resolutions

The first few days of a new year are great for fresh resolutions. As traders and investors in the financial markets, let us all resolve that in 2024, we should trade smartly. The year that just ended was mostly a one-way street; generally, it was a buy-the-dip market. But who knows what 2024 is going to bring? We know that when there is a consensus about something, we should look elsewhere for our most profitable trades.

One of my New Year’s resolutions is to share my thoughts more frequently and perhaps regularly. I will travel again to the USA in late January, but I hope this won’t upset my desire to help you, my readers, in your journey to financial freedom.

For today, let me share from my notes how someone I know looks at the market. But do bear in mind that there are many methods for success. What follows is one approach that works for this person.

1. He spots bad companies by looking at the promoters’ stake in the company. Have they pledged a lion’s share of their holdings? Compare that with the market cap and judge whether the stock is priced correctly. What is the company’s net value, and how has it performed recently?

2. Is the stock breaking multi-year highs? Is there a macro theme at play?

3. What is the company’s total floating stock, and how does it compare to the volume being traded?

4. Is the stock breaking out after a long period of consolidation? If yes, he checks the fundamentals. Maybe this company is on the threshold of a multi-year bull run!

5. He keeps an eye open for important corporate news and considers its implications for the future of the company. Perhaps it is a merger that will open up a worldwide market, for example. He looks at the debt level and the cost of borrowing.

6. He speaks of holding a good investment for ten years! During such a time frame, if the company continues to do well, it can become a true multi-bagger of eye-popping proportions.

7. He looks at the dividend yield in the same sector as its competitors, the ROE and PE. If the stock is mispriced, it is just a matter of time before it catches up.

8. He looks at cycles in commodities.

9. He looks at large ranges and assumes they will hold.

10. He looks at the TIME spent in consolidation.

Despite my 40 years in the markets, I am still open to learning. So should you. Learn from people who have a track record. Keep notes and read them every few days.

I wish you and your families the very best in the new year.

Ramki

PS: Just a quick reminder. The New Year discount on my online course ends on 4 Jan 2024.